Asset protection is on a lot of people’s minds.  For some it may be on their minds unnecessarily.  Others do not have asset protection on their minds, but should.

Who should be thinking about asset protection?

The obvious answer is anybody that has some likelihood of being sued.  Thus medical doctors are an obvious group of people who need to be aware that at any time a patient could bring suit.  However, it does not have to be a patient; it could also be a partner or an employee.

Another high risk field is that of builders and developers.  Obviously, a project could go south because of a change in the market.  Eventual owners could sue and once again partners could also sue.

People in all types of businesses and professions need to be on guard.  That includes owners of apartment buildings, duplexes, or simply those who rent out a house.  I know of a situation where an owner of an apartment building was sued for a lot of money because there was a shooting on the property.

We are the most litigious society in the world. As most reading this know, even businesses who serve hot coffee have to be on their toes!

Another reason to do asset protection is to protect yourself when an investment goes bad.  Recently I read that the coach of the University of Michigan football team, Rich Rodriguez, was sued for $3.9 million due to a loan default in a condominium project.  What makes it interesting was that the money was borrowed by a limited liability company of which Rodriguez was a partner.  Ironically, one of the reasons that someone forms a LLC is for asset protection as I will discuss in a future blog.  However, Coach Rodriguez, it is alleged, gave a personal guarantee, and therefore may be liable for whatever the difference is between $3.9 million and the assets in the LLC.  It is true that the creditor can and probably is seeking repayment from all of the partners and not just Coach Rodriguez.  On the other hand, creditors often attempt to get repaid from the easiest source(s).

In future blogs, I will discuss other reasons to do asset protection and what are some asset protection mechanisms including trusts.